How cells partition the genome into active and inactive genes and how that information is established and propagated during embryonic development are fundamental to maintaining the normal differentiated state. The molecular mechanisms of epigenetic action and cellular memory are increasingly amenable to study primarily as a result of the rapid progress in the area of chromatin biology. Methylation of DNA and modification of histones are critical epigenetic marks that establish active and silent chromatin domains. During development of the kidney, DNA-binding factors such as Pax2/8, which are essential for the intermediate mesoderm and the renal epithelial lineage, could provide the locus and tissue specificity for histone methylation and chromatin remodeling and thus establish a kidney-specific fate. The role of epigenetic modifications in development and disease is under intense investigation and has already affected our view of cancer and aging.